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TAS Distributing Company, Inc. v. Cummins

December 10, 2009

TAS DISTRIBUTING COMPANY, INC., PLAINTIFF,
v.
CUMMINS, INC., DEFENDANT.



The opinion of the court was delivered by: Joe Billy McDADE United States District Judge

ORDER & OPINION

This matter is before the Court on Cummins' Motion for Partial Summary Judgment on Count II (Doc. 177).*fn1 TAS has responded in opposition to the motion (Doc. 183), and Cummins has replied (Doc. 187). For the reasons that follow, the motion is GRANTED in part and DENIED in part.

BACKGROUND

The background facts involved in this case have been set out in numerous previous Orders; they are repeated here for purposes of completeness. TAS is an Illinois corporation that invents, develops, and licenses patented, proprietary technology which automatically turns vehicle engines and accessories off and on under certain circumstances. Cummins is an Indiana corporation that manufactures engines for use in trucks.

One of TAS' technologies is the "Temp-A-Stop" system, which consists of computer code that automatically shuts down a vehicle's engine and accessories when the vehicle is parked or idling for a preset period of time. TAS has also developed the "Temp-A-Start" system, which incorporates the Temp-A-Stop system and which, additionally, consists of computer code that automatically turns on a vehicle's engine and accessories under certain conditions. Temp-A-Stop and TempA-Start both come in two different versions: an "ECM Product" (in which the system programming is contained in an electronic control module located in the vehicle's engine) and a "Retrofit Product" (in which the system programming is not built into the vehicle's electronic control module, but rather, can be added to the vehicle's engine). The focus of Count II, and of the instant summary judgment motion, is the Retrofit Product.

In February 1997, TAS and Cummins entered into a series of agreements through which TAS granted Cummins a worldwide, perpetual license to incorporate in Cummins' truck engines various technologies developed by TAS, including the Temp-A-Stop and Temp-A-Start systems. One of these agreements was an Intellectual Property License Agreement ("License Agreement"), which provided for royalty and payment terms governing Cummins' use of the technology. Section 5 of the License Agreement is entitled "Royalties" and provides, in part, as follows:

From and after the Retrofit Stand-Alone Date, Licensee shall pay a royalty to Licensor for every Retrofit Product sold by Licensee, whether sold under the Cummins brand or some other name, at the rate of: one hundred dollars ($100) per unit sold by Licensee in the first year commencing with the Retrofit Stand-Alone Date; one hundred and twenty-five dollars ($125) per unit sold by Licensee in the second year commencing with the first anniversary of the Retrofit Stand-Alone Date; and one hundred dollars ($100) per unit sold by Licensee in each year thereafter, commencing with the successive anniversaries of the Retrofit Stand-Alone Date. Royalties shall be paid on a monthly basis, with the first month beginning on the Retrofit Stand-Alone Date, within thirty (30) days after the close of each month. (Exh. A to Doc. 177, License Agreement § 5(a)).*fn2 Section 6 of the License Agreement is entitled "Licensee's Minimum Payments Obligation" and provides, in part, as follows:

Licensee covenants and agrees that, if Licensee shall have any of the rights granted to Licensee in Sections 3 and 4 of this License Agreement with respect to any of the Subject Technology or Related Intellectual Property, Licensee shall make, for each of the five (5) years commencing with the later of July 1, 1997 or the Decision Date in the Pending TAS Action or though [sic] settlement with DDC (the "Royalty Commencement Date"), either: (i) actual royalty payments of at least a total of the minimum royalty payments to Licensor according to the schedule below; or, if Licensee does not generate sufficient sales to meet the minimum royalty payments, (ii) payments within 30 days after the close of each year in addition to actual royalty payments for a total of the minimum royalty payments according to the schedule below.

Schedule of Minimum Royalty Payments

Year 1 $100,000

Year 2 $300,000

Year 3 $200,000

Year 4 $200,000

Year 5 ...


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